Corporate Governance

Principles of corporate governance have become conventional wisdom with the realisation that it is a necessary tool for the economic health of a company and more importantly, for society at large. Implementation of governance practices, however, continue to vary between companies, nations and across regions. The driving force for an increasing number of companies today is adopting voluntary initiatives that improve relationships with all constituents – customers, shareholders and all other stakeholders. But beyond a company’s direct web of relationships, the ‘corporate conscience’ has now taken centre stage wherein companies are differentiated on the basis of working conditions, environmental strategies and their response to community needs.

Governance norms have assumed greater significance in India with corporates having scaled up in size and ambition as they seek to establish a global footprint. Investors willingly attach a premium to well-governed companies. The upside of good governance is access to lower cost resources as well as better valuations. The Indian regulatory framework has ensured that the interests of stakeholders are well protected, though ultimately, the prime responsibility of good governance lies within an organisation and not outside it.

An effective corporate governance framework needs to be flexible to respond to changing market dynamics, yet it must be unwavering as regards its values and ethics. While designing and implementing governance processes, there is a need to ensure an effective mechanism of checks and balances with transparency and accountability as the hallmark.